Mahindra Charts Course for Indian Labor Peace

MUMBAI – As with other industries, Indian auto makers and components producers face periodic labor disputes. But differences within the automotive sector have been considerably more turbulent, in some cases turning violent and even deadly.

Clashes in the Gurgaon-Manesar region in north-central India belt are notorious for their frequency and intensity. The most deeply and repeatedly affected businesses include auto maker Maruti Suzuki; Honda Motor Cycle & Scooter; Hero Motors, a maker of electric scooters and auto parts; and some of the component makers.

Analysts say the agitation is rooted in the lack of communication between workers and employers. There are few forums where they can discuss views and ideas on management objectives and philosophy or on policies and practices that workers perceive as harmful to their self-esteem.

There are wide differences between salaries and labor relations in western and southern India and Gurgaon-Manesar, where a company providing improved salaries and working conditions can cause others to feel the heat from labor.

A government study found auto workers’ real wages fell 30% between 2001 and 2010. Auto makers nevertheless increasingly rely on large numbers of contract workers, who are paid less than permanent employees, receive no benefits and can be terminated at a moment’s notice.

At times, contract employees comprise up to half the workforce at some plants or companies, a sore point for organized labor. Yet auto makers say Indian labor laws prevent them from laying off permanent workers, even if sales or revenues fall substantially. As sales increase, the companies’ resources are strained to the point where they say they cannot operate without contract workers.

Contract employees at Maruti’s Gurgaon plant earn less than one-quarter of what permanent workers receive, and one-third less at the Manesar facility. But that situation also exists elsewhere; contract workers at the Hyundai plant at Sriperumbudur in southeast India are paid an average Rs15,000 ($276) a month, compared with Rs45,000 to Rs47,000 ($828 to $865) for permanent workers.

In addition to long hours of arduous labor, relations are strained by the behavior of plant supervisors or managers, many of whom are not fully trained in fostering morale and cooperation.

Labor-management tensions gave way to violence last summer, when the Maruti plant in Manesar was shut down for a month by a strike in which a manager was burned to death and more than 100 other managers were injured. India’s largest auto maker lost at least 35,000 units of production and losses reached Rs20 billion ($360 million).

Countering the prevalent mood in the auto industry, managers at Mahindra & Mahindra’s Nashik plant in Maharashtra and executives at the auto maker’s Mumbai headquarters handled a recent dispute positively and creatively.

Workers went on strike early this month over salary demands in a new contract succeeding a 3-year agreement that expired in December. Mahindra promptly set April 15 as the target date for completion of wage negotiations, and the walkout ended after two days.

The auto maker, in announcing the end of the strike, said “The management is in regular dialogue with the union for the normal wage negotiation process and will put in its best efforts to reach a mutually agreeable settlement at the earliest time possible.”

Other companies are starting to follow Mahindra’s lead in maintaining labor practices that ensure smooth operations. But some of the joint ventures find it difficult to adjust to labor relations that sharply contrast with those in their own countries.

Five years of rapid growth in sales and revenues has kept Indian labor-management relations relatively stable. But with the market contracting, conflicts are coming into sharper focus. The industry will need greater mutual confidence to emerge positively from this difficult period.